India’s #NetZero targets entail significant policy implementation challenges for the government, carving a more central role for the private sector to drive carbon transition – EQ Mag Pro
The country’s significant economic development needs will present constraints to the government’s ability to extend sufficient financial support to fund its carbon transition.
This leaves the path open for the private sector to drive emissions reduction, and many large companies have launched a wide range of emission targets through 2050
India’s (Baa3 stable) 2070 net-zero target and intermediate goals through 2030 present significant policy implementation challenges for the government, carving a more central role for private companies and investors to drive the transition, according to a new report by Moody’s Investors Service.
“The country’s high growth potential, significant economic development needs and large agricultural sector will likely weaken the government’s policy resolve and financial capacity to drive the economy’s carbon transition. As such, India’s planned emissions reductions will be conditioned upon low-cost, long-term private capital,” says Nishad Majmudar, a Moody’s Assistant Vice President and Analyst.
Many of the country’s large private companies have announced net-zero targets that are well ahead of Indian authorities’ goals, while government-linked companies are comparatively behind. Additional policy signals to encourage transition would drive higher private investment.
“The pace of India’s carbon transition will depend on the extent to which the government can balance energy affordability and reliability needs against its emissions reduction commitments,” says Abhishek Tyagi, a Moody’s Vice President and Senior Credit Officer.
“Reduced storage costs and the scalability of renewable projects with storage would support a faster transition,” adds Tyagi.
Finally, Indian banks’ significant loans to carbon-intensive sectors expose them to transition risks, and they will face pressure to decarbonize their loan books. At the same time, green financing presents a significant lending opportunity, given banks’ dominant role in credit intermediation in the country.
